U.S. stocks fell on Wednesday, with major indexes set for their first decline of the past five sessions after the Trump administration announced new tariffs on Chinese goods, the latest example of escalating tensions between the U.S. and its major trading partners, which investors fear could explode into a full-on trade war.

What are markets doing?

The Dow Jones Industrial Average DJIA, -0.55% fell 156 points, or 0.6%, to 24,762. The S&P 500 SPX, -0.41% was down 13 points, or 0.5%, to 2,781. The Nasdaq Composite Index COMP, -0.25% shed 0.4% to 7,726, a decline of 0.4%.

The slump comes after a four-day rally in all three indexes, a streak that represents the Dow’s longest in a month.

The day’s downturn were broad based, with 10 of the 11 primary S&P 500 sectors lower on the day. Leading the drop were the materials and the industrial sectors, both of which dropped more than 1%. The two are considered among the most tied to trade issues.

What is driving the markets?

The White House late Tuesday said it would assess 10% tariffs on a further $200 billion in Chinese goods. The move is seen as deepening the rift with Beijing and sending a message to other trading partners that the U.S. is willing to escalate a trade fight. The U.S. last week hit Beijing with levies on $34 billion in goods, and Beijing retaliated with tariffs of the same amount.

A final decision on the products to be hit with the new tariffs is expected after a consultation period in late August.

China’s Ministry of Commerce said in a statement that the new levies are “totally unacceptable” and that the behavior is hurting not just China, but the whole world.

Recent gains in the market have come as Wall Street shifts its attention to coming second-quarter earnings season, which is expected to show strong profit growth. Such signs of a strong economy, along with improving economic data, could provide a floor under equity prices, just as the trade issue provides a ceiling.

What are analysts saying?

“This is different from the other trade announcements, because the size is significantly larger, and because China is unable to directly reciprocate at $200 billion because they don’t import that much. It’s unclear what it might do next, but it is clearly another step closer to a full-blown trade war,” said David Carter, who oversees about $2 billion as chief investment officer at Lenox Wealth Advisors.

“If the trade skirmish escalates into a full-blown trade war, that will be a bigger force in the markets than the strong fundamentals.”

What’s on the economic calendar?

The June producer-price index rose 0.3%, as did the core PPI, which excludes volatile food and energy. The 12-month rate of wholesale inflation, meanwhile, climbed to 3.4% from 3.1%, marking the highest perch since the waning months of 2011.

Separately, wholesale inventories rose 0.6% in May.

Among Federal Reserve speakers, New York Fed President John Williams will give a speech on the economy to Brooklyn Town Hall at the Brooklyn Law School at 4:30 p.m. Eastern.

Which stocks are in focus?

Among notable industrial stocks, Boeing Co.BA, -1.21% fell 1.1% while 3M Co.MMM, -1.34% was off 0.9% and Caterpillar Inc.CAT, -2.15% fell 1.6%. All three were among the biggest drags on the Dow.

Shares of 21st Century Fox Inc.FOXA, -2.57% fell 2.5% after the media company significantly lifted its offer price to takeover Sky PLCSKY, +0.03% . The move is heating up a bidding war with Comcast Corp.CMCSA, +1.18% , which is also interested in buying the British broadcaster. Comcast rose 1.3%.

Shares of Nvidia Corp.NVDA, -1.19% dropped 1.7% after the tech company late Tuesday announced a partnership with German car maker Daimler AGDAI, -1.88% and auto-parts giant Bosch Ltd. to test robot taxis in California.

Facebook Inc.FB, +0.32% was down 0.2% after confirming late Tuesday it could be fined about $660,000 by a U.K. regulator over the Cambridge Analytica scandal.

Fastenal Co.FAST, +7.96% rose 3% after the company late Tuesday said its board raised the quarterly dividend to 40 cents a share from 37 cents a share. The fastener manufacturer is slated to report quarterly earnings ahead of Wednesday’s open.

What are other markets doing?

The ICE U.S. Dollar Index DXY, -0.02% was flat at 94.139, after a report on wholesale inflation, while the yen USDJPY, +0.22% was weaker against dollars. The buck bought ¥111.21, up from ¥111.00 late Tuesday in New York.

Asian markets closed mostly lower in reaction to the tariff news, with the Shanghai Composite SHCOMP, -1.76% sliding by 1.8%. European stocks SXXP, -1.07% also opened firmly in the red.